I just got my 1200 about a year ago, but I have not really had a chance to get it running today. The guy I got it from said it had said that it sat for several years without running. Also he didnt have a title, so I got a different frame with a title. I swapped everything from one frame to another, but when I got it fired up the pase couple days, I noticed a brown sludge coming from the weephole under the waterpump. I flushed the cooling system and pressure tested it and it lost no pressure, but with it running it is dripping this sludge. Is is possible the water pump is bad, or could it just be some build up in the case. I had pressure on the cooling system for 2 days straight with no pressure loss. Any susgestions would be helpful.

The water pump has two sets of seals - one that seals the coolant, and one that seals the engine oil. The coolant seals are likely intact (based on your testing), but the engine-side oil seal is likely shot, so you're seeing oil sludge coming out the weep hole. More than likely the water pump needs to be replaced.